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Schaefer Kalk GmbH & Co. KG v. Germany - judgment

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A German company operating a facility covered by the EU carbon emissions trading system argued that carbon dioxide that is transferred to a non-covered facility and becomes chemically bound - and is thus not released into the atmosphere - should not be considered "emitted." The European Court of Justice agreed, invalidating an EU regulation insofar as it systematically included carbon dioxide that becomes so chemically bound in the trading scheme regardless of whether that carbon dioxide is actually emitted into the atmosphere. 

Schaefer Kalk GmbH & Co. KG (Schaefer Kalk) operates an installation for the calcination of lime in Hahnstätten, Germany, which is subject to the European Union Emissions Trading Scheme (EU ETS). During the lime calcination process carbon dioxide is emitted, which Schaefer Kalk transfers to an installation that is not covered by the EU ETS for the production of precipitated calcium carbonate (PCC).  In the process of getting its monitoring plan approved, Schaefer Kalk applied for authorization to subtract the carbon dioxide transferred for PCC production from the amount of greenhouse gas emissions in the company’s emissions report. Schaefer Kalk argued that the transferred carbon dioxide is chemically bound in the PCC and that, not being emitted into the atmosphere, it cannot be regarded as “emissions” as defined in Article 3(b) of Directive 2003/87/EC.

The German Emissions Trading Authority at the Federal Environment Agency (DEHSt) approved the monitoring plan without addressing the issue of subtracting transferred carbon dioxide. Schaefer Kalk brought a complaint to the DEHSt, which was rejected. The DEHSt argued that subtraction was not legal under Article 49 of Regulation (EU) No 601/2012 and Annex IV thereto, which only provides that carbon dioxide transferred to one of the long-term geological storage installations listed in that article may be subtracted from the emissions.

Schaefer Kalk subsequently brought the matter before the Berlin Administrative Court and argued that Article 49(1) of Regulation No 601/2012 and point 10(B) of Annex IV thereto subject carbon dioxide bound in PCC and transferred for the production of that substance to mandatory participation in the EU ETS, and are therefore not covered by the powers granted under Article 14(1) of Directive 2003/87/EC. The Berlin Administrative Court then referred the matter to the European Court of Justice (ECJ).

The ECJ held that the second sentence of Article 49(1) of Regulation No 601/2012 and point 10(B) of Annex IV to that regulation are invalid in so far as they systematically include the carbon dioxide transferred to another installation for the production of PCC in the emissions of the lime combustion installation, regardless of whether or not that carbon dioxide is released into the atmosphere.

Schaefer Kalk GmbH & Co. KG v. Germany

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

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Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

A long-lived, colourless gas, chiefly emitted from fossil fuel combustion, deforestation and cement production.

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

Tradable permits are market-based tools that grant permission for specific activities, frequently used to regulate emissions. These permits can be issued within a trading system to manage environmental impacts.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

This sector involves activities to move goods and people, alongside the storage of products.

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

Schaefer Kalk GmbH & Co. KG v. Germany - judgment

Policy instrument

Risk

Fossil fuel

Greenhouse gas

Economic sector

Finance